E Ascendas REIT: A Lot To Like For An Income Investor

Ascendas REIT (ACDSF) is a real estate investment trust focused on business space and industrial properties based out of Singapore. It is the largest such trust operating in the small city-state, boasting 102 properties in Singapore, ten properties in Australia, and two properties in China. This scale, breadth of operations, and the natural characteristics of real estate make Ascendas REIT an excellent opportunity for income-focused investors.

Ascendas REIT’s portfolio is quite well diversified among a variety of industrial property types, as shown here:

There are a number of advantages to having such variety among its properties. The most important of these is that the trust is able to both attract and accommodate tenants from a wide variety of industries. This insulates the trust somewhat from economic fluctuations as it ensures that the trust’s rental revenues are not overly dependent on any one industry. As a result, an economic downturn that forces several companies in an industry into a situation where they could not continue to make rent payments is unlikely to have a significant impact on top-line revenues. As this chart shows, no single industry accounts for more than 11.0% of the trust’s revenue.

Source: Ascendas REIT

With that said however, while a variety of industries can use some facilities, such as office space, there is only one industry that makes extensive use of warehouses, which make up 28% of Ascendas REIT’s gross floor area and 17% of its gross asset value in Singapore. In addition, Ascendas REIT is in the process of acquiring 26 warehouse properties in Australia. This will increase the gross lettable area of its warehouses by 76% and naturally result in their proportion of the portfolio increasing (although it will still be balanced). This may be one reason why an outsized proportion of the trust’s new leases are transportation, logistics, and shipping providers.